Global credit rating agency Fitch released a report last Thursday outlining the credit risks for Asia’s ‘CCC’ sovereigns. According to the report, Fitch projects that three Asia Pacific countries the agency downgraded credit ratings to ‘CCC’ in 2020 – Laos, Sri Lanka and the Maldives – will experience growth in 2021.
Although economic growth is expected to improve in these countries, Fitch states that creditworthiness is not expected to bounce back to pre-pandemic levels.
“All three ‘CCC’ APAC sovereigns should see a pick-up in growth in 2021, partly reflecting base effects after the weak 2020 performance amid the pandemic shock,” stated Fitch. “We expect 18% average annual growth in the Maldives in 2021-2022, although the forecast is vulnerable to risks around the pandemic’s impact on tourism.”
The forecasts imply that real output in 2022 will still be below 2019 levels in Maldives.
“The high level of general government debt adds to debt sustainability problems, particularly in the Maldives and Sri Lanka,” stated the report. The agency expects general government debt to reach 105 percent in the Maldives by the end of 2022.
